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Default retirement age – or not?

Changes to employment law happen twice a year, in early April and early October. The changes at the beginning of this month were fairly modest, but the biggest was the final disappearance of the default retirement age, in other words the age at which a forced retirement will not trigger a possible age discrimination claim. But, without a default retirement age, will employers be able to set their own individual retirement ages for their workforce, or sections of their workforce, rather than dealing with each employee’s retirement individually.

It is fair to say that most employers that have considered this have decided not to try to fix a retirement age, even though, in theory, it is permissible to do so if it is a “proportionate means of achieving a legitimate aim”. The default retirement age has never applied to partners, which is why the case of Seldon v Clarkson Wright & Jakes is of such interest to employment lawyers. Here, the senior partner of the firm was retired compulsorily under the terms of the partnership agreement at age 65, and brought an age discrimination claim which thus far the firm has defended successfully up to the Court of Appeal. However, the case is due to be heard in the Supreme Court in January.

The Court of Appeal accepted that the firm’s policy of requiring partners to retire at 65 had the following legitimate aims:

clearing the way for associates to move forward to partnership within a reasonable time;

enabling partnership and workforce planning; and

promoting collegiality by limiting the need to expel partners through performance management processes. So far so good. It is quite reasonable to say that these are legitimate aims. The problem lies in arguing that choosing the age of 65, as opposed to any other age, is a proportionate means of achieving these aims, or even that it achieves these aims at all. On this point the Court of Appeal’s decision looked much more open to debate, saying, in effect, that 65 was a proportionate age to compel partners to retire, because that was the age at which employees could be compelled to retire under the default retirement age provisions. The abolition of the default retirement age was announced the day after the Court of Appeal’s decision was published. Now, the default retirement age does not apply neither does the Court of Appeal’s argument.

Without the default retirement age as a justification for age 65 it becomes very hard to say that any particular age is the appropriate one. This is the real problem with any specific retirement age fixed by the employer: you can always say that a different age would be better. In theory, employers can provide research to show that a particular age is fair and proportionate, but this is problematic in practice, because each person ages differently. We are hoping that decision in Seldon will show how far employers will have to go to justify a particular age.

There have been various European cases where laws fixing retirement ages have been upheld, but in making laws, member states of the EU have a “margin of appreciation” (basically, wriggle room) not afforded to individual employers. In September the ECJ decided that Lufthansa was not entitled to retire it pilots at 60 on grounds of safety (Prigge v Deutsche Lufthansa AG). This is another example of the difficulty of using age as a proxy for capability: some pilots may be unsafe at 60, others could fly safely into their 80s and some are no doubt, a danger in their 50s. Of course, air safety is an emotive subject and no one wants to see planes dropping out of the sky in order to prove a particular retirement age is justified. On the other hand, requiring a regular medical (for pilots of all ages) might be a better approach.

As things stand, I am not optimistic about the prospects for justifying any particular age, so, until we have the Supreme Court’s decision in Seldon, which we will be examining very closely, looking at each case individually looks a much safer approach. Safer, but not necessarily safe.

ACAS guidance suggests having regular “workplace discussions” with employees (see Age and the Workplace) but this sort of open discussion with employees can go horribly wrong, even if started with the best of intentions. No doubt, as time goes by, employers will become as proficient at these discussions as they already are at redundancy consultation.

Changes to employment law happen twice a year, in early April and early October. The changes at the beginning of this month were fairly modest, but the biggest was the final disappearance of the default retirement age, in other words the age at which a forced retirement will not trigger a possible age discrimination claim. But, without a default retirement age, will employers be able to set their own individual retirement ages for their workforce, or sections of their workforce, rather than dealing with each employee’s retirement individually.

It is fair to say that most employers that have considered this have decided not to try to fix a retirement age, even though, in theory, it is permissible to do so if it is a “proportionate means of achieving a legitimate aim”. The default retirement age has never applied to partners, which is why the case of Seldon v Clarkson Wright & Jakes is of such interest to employment lawyers. Here, the senior partner of the firm was retired compulsorily under the terms of the partnership agreement at age 65, and brought an age discrimination claim which thus far the firm has defended successfully up to the Court of Appeal. However, the case is due to be heard in the Supreme Court in January.

The Court of Appeal accepted that the firm’s policy of requiring partners to retire at 65 had the following legitimate aims:

clearing the way for associates to move forward to partnership within a reasonable time;

enabling partnership and workforce planning; and

promoting collegiality by limiting the need to expel partners through performance management processes.

So far so good. It is quite reasonable to say that these are legitimate aims. The problem lies in arguing that choosing the age of 65, as opposed to any other age, is a proportionate means of achieving these aims, or even that it achieves these aims at all. On this point the Court of Appeal’s decision looked much more open to debate, saying, in effect, that 65 was a proportionate age to compel partners to retire, because that was the age at which employees could be compelled to retire under the default retirement age provisions. The abolition of the default retirement age was announced the day after the Court of Appeal’s decision was published. Now, the default retirement age does not apply neither does the Court of Appeal’s argument.

Without the default retirement age as a justification for age 65 it becomes very hard to say that any particular age is the appropriate one. This is the real problem with any specific retirement age fixed by the employer: you can always say that a different age would be better. In theory, employers can provide research to show that a particular age is fair and proportionate, but this is problematic in practice, because each person ages differently. We are hoping that decision in Seldon will show how far employers will have to go to justify a particular age.

There have been various European cases where laws fixing retirement ages have been upheld, but in making laws, member states of the EU have a “margin of appreciation” (basically, wriggle room) not afforded to individual employers. In September the ECJ decided that Lufthansa was not entitled to retire it pilots at 60 on grounds of safety (Prigge v Deutsche Lufthansa AG). This is another example of the difficulty of using age as a proxy for capability: some pilots may be unsafe at 60, others could fly safely into their 80s and some are no doubt, a danger in their 50s. Of course, air safety is an emotive subject and no one wants to see planes dropping out of the sky in order to prove a particular retirement age is justified. On the other hand, requiring a regular medical (for pilots of all ages) might be a better approach.

As things stand, I am not optimistic about the prospects for justifying any particular age, so, until we have the Supreme Court’s decision in Seldon, which we will be examining very closely, looking at each case individually looks a much safer approach. Safer, but not necessarily safe.

ACAS guidance suggests having regular “workplace discussions” with employees (see Age and the Workplace) but this sort of open discussion with employees can go horribly wrong, even if started with the best of intentions. No doubt, as time goes by, employers will become as proficient at these discussions as they already are at redundancy consultation.